In a December 23 letter to Senate Finance Committee Chair Max Baucus, [D-MT] and ranking minority member Chuck Grassley, [R-IA], attorney Conrad Teitell of Cummings & Lockwood LLC, speaking on his own behalf, urged the Senators to confer with their colleagues and announce by year-end an estate tax compromise and discussed the consequences of not doing so.

Full Text:

Dear Chairman Baucus and Ranking Member Grassley:

I was one of the four invited witnesses who testified at the November 14, 2007 Senate Finance Committee hearing "Federal Estate Tax -- Uncertainty in Planning Under the Current Law."

Following the hearing, many of the committee members submitted numerous questions to me for the record. My answers were submitted on January 15, 2008. I call your attention to the question asked by Senator Grassley and my response. It is relevant to the current unfortunate situation.

Question from Senator Grassley:

Mr. Teitell, as you have seen from the House and Senate debate over the last few years, there is a sharp division on what our long-term estate tax policy ought to be. There is a bipartisan group who would like to, at a minimum, ensure that the estate tax does not rise above the level set in 2009. The resistance to estate tax reform resides in the Leadership of the House and Senate majorities. If the Democratic Leadership agreed that, at a minimum, the estate tax would not rise above 2009 levels, would that provide clarity to estate planners like yourself? That is, clarity for the period between now and the time long-term estate tax relief is enacted?

Conrad Teitell's answer:

Mr. Ranking Member: I am sure that taxpayers and their advisers would salute members of Congress who reach a compromise so certainty will reign for the foreseeable future.

With all due respect to members of both parties, the mood of the country on this issue -- based on what I hear at my lectures on estate planning to professional advisers and laypeople across the country and my discussions with fellow professionals at estate-planning conferences -- is that people are fed up with the Congress's inability to resolve this issue.

The present Congress can't, of course, by public statement or legislation, guarantee what a future Congress will do. But for now, passage before the summer recess of a revised estate-tax law with a $3.5 million exemption (the 2009 exemption and rates alluded to in your question) would cure the current planning paralysis. The planning techniques sanctioned under current law -- as well as the unlimited marital and charitable deductions -- should be retained.

Congress's failure to act as 2009 draws to a close and statements that it might retroactively "fix" the estate tax early in 2010 has caused estate planners (who aren't already bald) to pull their hair out. You've heard all the arguments about the appropriate exemption and rates and the difficulties with carryover basis. These, of course, are of concern.

Apart from the tax issues, however, Congress's failure to act can result in the disinheriting of spouses and other intended beneficiaries. How so? Many estate plans key the amount that various beneficiaries would receive to the federal estate tax exemption. Under many formula clauses, a spouse and other beneficiaries can be disinherited or receive different bequests than intended. The formula clauses are based on the assumption that an estate tax exists and that there is an exemption.

Mr. Grassley, I implore you to call your statement about a $3.5 million compromise (reproduced above) to your colleagues' attention.

Mr. Baucus, you recently stated that you and your colleagues will seek a compromise in early 2010. But your December 22 statement to reporters creates additional concern. You stated: "It's very possible that estate tax reform will be folded into a broader tax reform bill next year." That effort is unlikely early in 2010. Any further delay ("from early in 2010") will exacerbate confusion and in many cases cause significant additional harm.

Gentlemen, I hope that you will: (1) confer with your key colleagues over the holidays; (2) announce by December 31 a "permanent" or short-term compromise; and (3) give a date certain in early January 2010 when the compromise will be voted on.

Do not allow your constituents' estate plans and wishes for the disposition of their property to burn while Congress dawdles.

This letter represents my personal views and does not represent the official view of my law firm or any organization to which I belong. No client has engaged me to make these comments to you.